With its latest 3QFY2022 ended September results boasting improvements across the board, Venture Corporation seems to be on track for a recovery. Analysts are bullish on its prospects, but are keeping in mind potential risks from a volatile macroeconomic environment.
Analysts from Maybank Securities and CGS-CIMB Research have maintained their “buy” and “add” calls on Venture, but Maybank’s Jarick Seet has raised his target price by almost 30% to $20.20 from $19.55.
CGS-CIMB’s William Tng and Izabella Tan, on the other hand, maintained their target price at $19.62.
In his note, Seet calls Venture his “top pick” in the Singapore tech sector, and notes that Venture reported a “solid” 3QFY2022 ended Sept 30, with revenue up 32.8% y-o-y to $1.02 billion and net profit after tax (NPAT) rising 26.4% y-o-y to $97.4 million, which beat his respective forecasts of $890 million and $89 million.
He adds, “we remain positive on Venture’s robust order book which is well-diversified in terms of both customers and industries.”
Seet notes that Venture reported growth across all domains, resulting in quarterly revenue once again exceeding $1 billion with backlog orders still to clear.
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Even in the semiconductor segment where a slowdown is expected, management remains confident that its differentiation in capabilities, design and products should see continued strong demand from the specific value chain where it operates.
Furthermore, he highlights that downside risks to Venture are protected by an “attractive yield” of 4.7%. Seet notes that management declared an interim dividend of 25 cents per share this year and he expects the final dividend to be at 50 cents per share.
Seet also points out that management will also conduct a corporate share buyback to utilise its $700.7 million net cash position more efficiently.
On the interest rate front, Seet says that the strengthening US dollar is beneficial for Venture, considering that the majority of Venture’s revenues are in US dollars, and a large part of its cost structure is in Malaysian ringgit, followed by Chinese Renminbi and US dollars.
He believes that Venture will be able to seamlessly navigate uncertainties like geopolitical tensions, Covid-19 lockdowns, and is shifting towards higher-margin products and solutions.
As for CGS-CIMB’s Tng and Tan, they believe the company is “on track for recovery” to pre-Covid net profit levels, adding that the 3QFY2022 results have also surpassed their expectations.
However, they do explain that while the results came in above their expectations, they prefer to “err on the side of caution and maintain our [current] FY2022 net profit forecast, given macro headwinds and valuation basis.”
Tng and Tan though, do share Seet’s view that Venture is well-positioned to weather a slowdown with its net cash balance sheet with no debt, and demonstrated differentiated capabilities evidenced by its pre-tax margin trend.
As of 10.19 am, shares of Venture were trading at $17.14, with a FY2022 P/B of 1.6 and dividend yield of 4.6%.
